Modern competition law rests upon a distinction between property-based “internal or unilateral” firm action and contractual-based “concerted or cooperative” firm action. And law treats the former conduct as presumptively lawful while subjecting the latter to exacting scrutiny through the lens of market power theories. This tendency is grounded that current competition law rests upon price theory's nature of the firm (black box) and the derivative model of workable competition.

However, application of New Institutional Economics (NIE) undermines the distinction between internal conduct and contractual conduct. NIE concludes that “a firm”, capable of “unilateral” action disposing of its own property, is in fact “nexus of contracts” between various individuals that supply labor, capital, and other inputs to avoid the cost of transacting relying upon the market to conduct economic activity. After all, the nature of competition is contractual competition. This approach to the nature of the firm and competition also helped economists and legal scholars interpret other methods of contractual organization short of complete vertical integration.

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